IR35 Insurance

Being ‘caught by IR35’ is a fear that many contractors face as a HMRC investigation into your IR35 compliance can be an extremely stressful and costly enterprise. Even the most diligent contractor can fall foul of the labyrinthine regulations and requirements, so it’s advisable to take out IR35 insurance to protect your business.

IR35 enquiry

Is tax liability insurance a necessity?

Many contractors are beginning to see tax liability insurance as a necessity. IR35 legislation is designed to weed out limited company-running contractors who are in fact employees in all but name, working a single job for a single client but enjoying all the tax benefits afforded to limited companies. According to HMRC, this type of worker should be taxed similarly to employed workers and, if you are judged to be within IR35 and haven’t declared it, you could be liable for thousands in back taxes, plus interest.

Frequently Asked Questions

Why should a contractor want IR35 insurance?

You may think that your tax status is fairly obvious. However, there are a number of ‘traps’ that HMRC uses to catch contractors that can cause those who believe that they are legitimately working outside IR35 legislation to fall foul. The process often starts with a PAYE audit and if HMRC becomes suspicious of any wrongdoing, they can escalate the enquiry to an IR35 specialist.

There can be a lot of anxiety associated with this stage as HMRC have never revealed their criteria for escalating an IR35 enquiry, so although the odds are against your business being targeted, the element of the unknown is enough to convince a lot of contractors that they should take precautions for their business.

Once your business is under investigation for IR35 non-compliance, the costs can quickly mount: not only do you have to pay legal fees, you could also be liable for back taxes if you are found to have evaded IR35 regulations. This is true too of a PAYE compliance review, a VAT dispute or any other HMRC enquiry.

What services does IR35 insurance cover?

You can elect to purchase insurance that covers your legal representation (an expense which can be upwards of £130/hr) or you can go for more comprehensive coverage to cover your losses should your defence prove unsuccessful. If HMRC determines that you fall under IR35, and therefore owe back taxes and penalties, the bill can be crippling for a small business. Comprehensive coverage gives you the peace of mind, that should the worst happen, you’ll be able to meet the costs.

Some insurers also offer a IR35 compliance service that provides qualified financial experts to analyse every aspect of each assignment contract so that the wording doesn’t give any ammunition for HMRC to suggest that you’re actually an employee.

What kind of things might put me in danger of being investigated?

The HMRC are on the look-out for contractors that have all the security associated with a traditional employee but are also benefiting from things like tax breaks on their expenses and VAT.

If you want additional clarification on your IR35 position, the HMRC website provides a quiz that helps you work out if the assignment you’re doing falls within IR35 legislation. It will also help you identify certain rules that will help you spot ‘red flag’ assignments.

What can I do to help prove I am outside of IR35?

There are some simple practices that would benefit all contractors who want to prove that IR35 does not apply to them and that they are not simply a disguised employee.

Create a document that outlines exactly how each assignment places you outside of IR35.
You could detail your financial risk, the ways in which you fall outside of company structure and show that you control your own work schedule and practices.

Take out business insurance.
HMRC will see your investment in business insurance, particularly professional indemnity as a sign that you are outside IR35. Paying money to protect your business interests is something a traditional employee simply doesn’t have to think about.

Draw up a “confirmation of arrangements” document for your client.
This outlines the specifics of each work engagement so that you can show HMRC that you and your client are in agreement about the nature of your work with them. If you do fall under investigation then HMRC will personally interview your end-clients so it’s good to have everything clear and agreed ahead of time.

Invest time and money in the promotion of your business.
Everything you can do to show that your limited company is an independent entity that requires a substantial financial risk on your behalf is a good argument that you’re IR35 exempt. So make that website, get the business cards and fancy letter-headed paper and know that what is good publicity also strengthens your company’s status as a commercial entity.

Exercise your right of substitution.
It’s very important that HMRC sees your company as providing services on a business-to-business basis. This means that if you need to, your client should allow you to provide a qualified substitute to undertake the work in your stead. Having this clause written into your contract is an extremely useful way to prove that you operate in an entirely different mode to an employee.

If I get investigated for IR35, who will be looking after my case?

A lot of policies skew towards the insurance company nominating their choice of tax advisor. If you already work with an accountant, it might be advisable to see if they can work on your case as they have a more nuanced understanding of your finances.

That said, insurance companies often employ ex-HMRC inspectors so it could be that they have an understanding of the system that could heavily benefit your case. The main thing is that you investigate exactly what support is available and make an informed decision based on the needs of your business.

Privacy Notice

Contractor Supermarket Limited Limited (hereafter called Contractor Supermarket Limited) respects your privacy and will process your data in a fair and lawful way. This privacy notice outlines the way in which Contractor Supermarket Limited collects, processes and shares your data and how long we retain it for.

Where we get our data from We will received your data from:
Directly from you via phone, email or on our website; Introducers; Suppliers; Analytics providers; Advertising networks; Search information providers; Companies house; Electoral register; Land registry and Other publicly available sources.

What we use the information forWe will use the data for:
Providing you with the services that you have requested from ourselves; Marketing and market research; Fraud prevention and processing payments to third parties.

Contractor Supermarket Limited may from time to time use aggregated, or redacted data for any purpose. Although this comes from your personal data it is not considered personal data, as it does not directly or indirectly reveal your identity, and we are free to use this at any time.

Legal basis for processing data

Contractor Supermarket Limited will process personal data for the purposes already stated on one or more of the following legal basis:

Consent – you have consented to us using your personal data by adding your details to our website and reading this privacy notice. You can withdraw consent at any time by directing an email to [email protected];

Contractual obligation– It is necessary for us to process your data to perform the contract between Contractor Supermarket Limited and yourself, or to take any necessary steps at your request prior to entering into this contract;

Legal obligations – we may need to process data in order to fulfil Legal obligations for example audit purposes;

Legitimate interests – we may use your personal data to operate, promote or improve our services or use your data for analytics or in order to protect our business.

Contractor Supermarket Limited will use your data for the purpose for which it was collected, unless we consider that we reasonably need to use it for another reason, if that reason is compatible with the original purpose. If we would like to use your data for any other purposes we will notify you and provide explanation as to the legal basis under which we will be able to use your data.

Data retention
Contractor Supermarket Limited will only keep your data:
As long as necessary to fulfil our contractual obligations or As long as necessary to fulfil legal and regulatory obligations

Contractor Supermarket Limited will determine the length of time we can keep your data by considering the above and:

Potential risk from unauthorised use or disclosure; the purposes for which we process your data and If we can achieve the same results some other way without requiring your data

We may anonymise your data allowing us to retain for as long as we wish as it can no longer be associated to yourself.

Transfer of data
Contractor Supermarket Limited ensure that there are adequate jurisdictional data protection regulations in place should your data be transferred outside of the EEA(you will be informed if this is necessary), Your data is currently stored inside the EEA and Contractor Supermarket Limited have data protection policies, procedures and safeguards in place to protect the security of your data.

Your rights You have the right:

To be informed– we will tell you when we collect data what we are going to do with it, primarily through this privacy notice;

Of access – you can contact Contractor Supermarket Limited in righting to request the information that we hold about you;

To Erasure – you can ask for your information to be deleted( this is not an absolute right and will depend on any legal restrictions) We will keep a list of your wish to be deleted to ensure you do not end up in our database again at any future time;

To rectification – you can ask for any information to be amended if it is inaccurate or incomplete;

To restrict processing – tells us to stop processing your data but allows us to keep hold of it for other agreed purposes;

To data portability – to transfer information to another business at your request (most used for instance such as changing bank accounts);

To object – to use of your data for marketing and profiling for marketing purposes. Our Legitimate interests do not outweigh your rights and freedoms, therefore you can cease us processing based on our legitimate interests;

To withdraw consent – you may withdraw consent to the processing of your data at any time, you can withdraw this consent by emailing or calling the following: [email protected], +353 71 932 0877;

To complain – if Contractor Supermarket Limited do not satisfactorily deal with your complaint you can complain to the Information Commissioner’s Office.

Data Security
Contractor Supermarket Limited take data protection responsibilities very seriously and have ensured that your data is treated fairly, lawfully and with the respect it deserves. Contractor Supermarket Limited have took adequate measures to protect your data from being accidently lost, used, accessed or disclosed in any way that has not been authorised . We have these procedures in place to prevent breaches, however we shall inform you and the relevant regulatory bodies should any data breach occur.